South African Airways could sell shares to the public as the state-owned carrier seeks ways to end years of losses and reduce the need for bailouts, according to people familiar with the matter.

The move would enable the government to cut its stake in much the same way as it did with former phone monopoly Telkom SA, almost two decades ago, said the people, who asked not to be named as the information is not public. However, the carrier would first need to make progress with a turnaround plan designed to reach break-even in three years, they said.

While the sale of a stake to an equity partner has been aired repeatedly over the years, this is the first time it’s been suggested that SAA should list on a stock-exchange. Pretoria-based Telkom’s initial public offering in 2003 raised almost $500m and the government’s shareholding is now just under 40%.

SAA declined to comment

The airline’s Chief Executive Officer Vuyani Jarana is facing renewed pressure from his bosses in government, which last month put aside R5bn to help SAA repay debt.

Last week, Finance Minster Tito Mboweni said it was his preference to shut down the carrier rather than continue to stretch state finances, while his counterpart at the department of public enterprises, Pravin Gordhan, warned on Monday that “radical things need to be done” for the airline to survive.

Nigeria flights

More immediate plans than the share sale include holding discussions with potential commercial joint-venture partners including Air Mauritius, one of the people said. That could lead to cost savings on routes to the Asian-Pacific market as the airlines would share operating costs.

SAA will also consider a resumption of flights to Abuja, the Nigerian capital, which it abandoned in 2017, the person said. The carrier would apply for a local license - or find a partner - to help Nigerians travel to the U.S.

Jarana, 48, a former executive at South African mobile-phone market leader Vodacom, was hired a year ago, in part for his experience in the private sector. He also has no connection with previous management, which has been embroiled in the corruption scandals that plagued state-owned companies during ex-President Jacob Zuma’s almost nine years in charge.

SAA has had an equity partner before. The government sold 20% of the carrier in 1999 to Swissair, which pioneered the concept of an alliance anchored via minority stakes, only to buy the shares back in 2002 when the European carrier went bankrupt.

Bitcoin recently turned ten years old. In that time, it has proved revolutionary because it ignores the need for modern money’s institutions to verify payments. Instead, Bitcoin relies on cryptographic techniques to prove identity and authenticity.

However, the price to pay for all of this innovation is a high carbon footprint, created by Bitcoin mining.

Fundamental to that mining process is a peer-to-peer network of computers, referred to as validators, who perform Proof of Work. In essence, this involves computers solving computationally-intensive cryptographic puzzles that prove blocks of transactions, which are recorded in a public asset ledger, known as a blockchain. This ledger is publicly viewable by all computers, which helps the system achieve consensus in an unreliable network of participants.

Validators are called miners because the computer, or node, that successfully validates one of those blocks is rewarded with “mined” Bitcoin. Thus mining is also the process by which Bitcoin adds new coins to the network.

But these processes consume a vast amount of power.

In my 2016 article, Socialism and the Blockchain, I estimated Bitcoin mining’s annual energy use at 3.38 TeraWatt hours (TWh), which I equated to the total 2014 annual consumption of Jamaica. Recent estimates show the currency’s annual consumption rising exponentially, currently reaching an incredible 55TWh. Indeed, a new paper in Nature Sustainability suggests that the energy costs of mining cryptocurrencies exceed the costs of mining physical metals. Furthermore, the paper estimates that Bitcoin emitted between 3m and 13m metric tonnes CO₂ in the first half of 2018. A team in Hawaii even suppose that, if Bitcoin’s adoption continues to rise, within a couple of decades, such emissions could help push global warming above 2°C.

The energy costs of mining Bitcoin, it has been estimated, now exceed the costs of mining actual metals.shutterstock

However, both the study in Nature and the team in Hawaii make assumptions about the means of energy generation. In the light of the recent disturbing UN 1.5°C Report, humanity would be wise to act on the recommendation for an “unprecedented shift in energy systems”. The hope is that such a shift towards large-scale renewable energy does occur, thus invalidating the assumptions made in those papers.

Nevertheless, concerns over Bitcoin’s energy consumption remain, so Ethereum, another cryptocurrency, is investigating a more energy efficient consensus algorithm known as Proof of Stake. This method differs from Proof of Work because miners on this network use their economic stake to prove transactions and therefore, they are not performing energy intensive calculations.

That introduces some complications – not least, how to ensure that people in this network act honestly, as they would have nothing to lose by behaving dishonestly? Ethereum’s proposed solution is to introduce penalties through measures such as penalising miners for simultaneously producing blocks on two versions of the blockchain. After all, only one of those blockchains is valid.

Bitcoin’s Proof of Work overcomes such problems implicitly because it includes natural penalties since miners have to expend energy to prove transactions.

In economic game theory, a Nash Equilibrium is said to be reached when a system stabilises because no one gains by changing strategy from that which produces the stable state. Since Bitcoin rewards are given to miners only if their blocks help form the valid Bitcoin blockchain, the most profitable outcome, or the Nash Equilibrium, is for each miner to act in consensus with the majority.

As a result, Bitcoin’s Proof of Work algorithm has proven effective, despite the excessive energy consumption.

In essence, my work looks at whether blockchains are a rebuttal to the hierarchies of capitalism. If Bitcoin promotes a way of organising that does not rely on capitalist consumption, might that indirectly drive down society’s energy use and help lessen its environmental impact? After all, consider the recent alarming WWF report, which all but blamed capitalism for the dramatic decline in wildlife populations. We need alternatives.

Perhaps, then, Bitcoin’s revolutionary offer, as an alternative to capitalism, means its energy use is a price worth paying? That argument holds some weight if it drives down consumption in other areas of society because Bitcoin mining is not the primary driver behind climate change. However, even then, given the urgency of environmental degradation, if we continue to produce energy in a manner that creates so much warming CO₂, that argument may provide scant consolation.

Perhaps alternative consensus schemes, such as Ethereum’s Proof of Stake, provide part of the solution. However, Bitcoin or not, if humankind is to avoid climate catastrophe, we need to take urgent action and find solutions that produce clean, sustainable energy. If we do that, humanity will benefit, and as a by-product, so will Bitcoin.

South Africa’s Discovery Ltd said on Thursday it will issue about 10.9 million new shares to qualifying investors in order to raise 1.85 billion rand ($132 million) to help fund an acquisition of a stake and assets in soon to be launched Discovery bank.

Discovery, which offers health, life and car insurance, was granted a South African banking licence last year, but only on condition that FirstRand sell its stake in a joint venture that is currently mainly focused on Discovery-branded credit cards.

In September both firms agreed that Discovery will purchase FirstRand’s 25.01 percent stake in Discovery Bank and the remaining 25.01 percent economic interest that FirstRand currently owns in the Discovery card joint venture.

The acquisition also involvea buying all rights to the Discovery card book and related assets, which will be migrated to Discovery over time. In order to fund the acquisition, Discovery said on Thursday it will issue new shares to qualifying investors to raise the purchase price of 1.85 billion rand.

In a separate statement, bookrunners said the price guidance will be between 160 rand and 162 rand per share. Its largest shareholder Rand Merchant Insurance Holdings Limited has indicated its intention to apply for 464 million rand worth of placement shares, the firm said.

Certain directors of Discovery, which include founders Adrian Gore and Barry Swartzberg and CEO of VitalityLife Herschel Mayers, have committed to subscribe for 240 million rand worth of shares.

“The subscription by the participating directors remains subject to the approval of the necessary resolutions at the annual general meeting of Discovery shareholders, scheduled for 26 November 2018,” the firm said.

Rand Merchant Bank, a division of FirstRand Bank Limited and Morgan Stanley & Co. International plc are acting as joint bookrunners for the placement.

The Nigerian National Petroleum Corporation (NNPC) has said its crude oil and gas export sale in August 2018 was $470 million, indicating an increase of about $78 million when compared with July oil and gas export figures of $391.91 million.

In a statement by NNPC Group General Manager, Group Public Affairs, Ndu Ughamadu, the figures were contained in the corporation’s Monthly Financial and Operations report for August 2018 released on Wednesday in Abuja.

The report, which is the 37th in the series, indicated that crude oil export sales contributed $337.62 million, representing 71.83 percent of the dollar transactions compared with $283.43 million contribution in the previous month.

It stated further that the export gas sales during the period amounted to $132.38 million, adding that the August 2017 to August 2018 crude oil and gas transactions involved crude oil and gas export worth $5.26 billion.

The NNPC report explained that based on the above sales figures, a total export receipt of $450.24 million was recorded in August 2018 as receipt against $382.65 million in July 2018.

Contribution from crude oil during the period amounted to $336.43 million, while gas and miscellaneous receipt stood at $101.33 million and $12.48 million, according to the report.

A further breakdown of the figures showed that out of the export receipts, $142.31million was remitted to the Federation Account, while $307.93 million was remitted to fund the JV cost recovery for the month of August, 2018 to guarantee current and future production.

The state-owned oil firm said the total export crude oil & gas receipt for the period August 2017 to August 2018 stood at $5.23 billion out of which $3.74 billion was transferred to JV Cash Call as first line charge and the balance of $1.49 billion paid into the Federation Account.

On Naira payments to the Federation Account, the report informed that NNPC transferred N128.40 billion into Account for the month under review. It also explained that from August 2017 to August 2018, the Federation and JV received N879.02 billion and N651.4 billion respectively.

Providing insight into the corporation’s remittances to the national treasury, the NNPC explained that the Federation Crude Oil & Gas Revenue, Federation Crude Oil and Gas lifting, are broadly classified into Equity Export and Domestic crude which are lifted and marketed by corporation and the proceeds remitted into the Federation Account.

It informed that Equity Export receipts, after adjusting for Joint Venture (JV) Cash Calls, are paid directly into the Federation Account domiciled in Central Bank of Nigeria (CBN).

The corporation explained that domestic crude oil of 445,000 barrels per day was allocated for refining to meet domestic products supply, and payments were effected to the Federation Account by NNPC after adjusting crude & product losses and pipeline repairs & management costs incurred during the period.

The Minister of State for Aviation, Hadi Sirika, says the Nigeria Air project followed due process and is currently at procurement stage awaiting approval of the Federal Executive Council (FEC).

Mr Sirika also discredited claims that the government spent $600,000 on the design of the logo after the carrier was unveiled at the Farnborough Airshow in London in July.

The minister spoke in Abuja on Thursday at the 5th Aviation Stakeholders’ Forum.

Mr Sirika said, “In recent months, misinformation, factual errors, insinuations and fabrications have been peddled in both social and print media on the Nigeria Air project.

‘‘These include desirability, inadequate planning, non-consultation with stakeholders, lack of transparency and publications of fictitious amounts allegedly spent by the government on the project, amongst others.’’

He declared that the federal government was determined to clarify these issues and set the record straight.

He explained that the current effort to establish the National Carrier predated the composition of the present FEC and his appointment as a minister.

‘‘Mr President directed the then Ministry of Aviation to commence the process for the establishment of a National Carrier during the Ministerial briefing on the Aviation Sector.

‘‘The ministry set up a committee which came up with the modalities for the establishment of a National Carrier.

‘‘The Committee in its report submitted in September 2015 recommended a private sector-led national carrier with 10 per cent government ownership and non-involvement of government in the management of the airline, but the provision of enabling environment for its operation,’’ he said.

The minister said following approval by the FEC, a consortium of Transaction Advisers (TAs), comprising Airline Management Group Ltd., Avia Solutions Ltd and Tianaero FZE, were appointed in line with best practices.

He said the TAs completed the Outline Business Case (OBC) Report, which was reviewed by the Infrastructure Concession Regulatory Commission (ICRC), which subsequently issued the OBC Certificate of Compliance.

According to him, the report has been presented to FEC for consideration to move to the procurement phase and then Full Business Case (FBC), where it will be opened for bidding by investors including ordinary Nigerians.

The minister explained that the estimated funding requirement for the establishment of the project was $300 million up to 2020.

He added that the expected initial start–up capital of 55 million dollars was made up of 25 million dollars for deposit for new aircraft and 30 million dollars for working capital from June to December 2018.

According to him, the estimated working capital for 2019 is 100 million dollars and 145 million dollars for 2020 to be provided by the Strategic Equity Partners who are expected to manage the project.

‘‘Certain media publications that 8.8 million dollars was expended at the Farnborough Air show are unfounded, malicious, misleading, mischievous and baseless.

‘‘The TAs for national carrier coordinated the campaign and provided the additional services that included the development of the brand strategy and the media activities relating to the unveiling of the airline.

‘‘Due process was followed in the branding, which included obtaining ‘‘No Objection’’ Certificate with Ref. No. BPP/RPT/18/VOL.1/075 from the Bureau of Public Procurement for payment of N50.8 million for these services is yet to be made.

‘‘No foreign company was paid $600,000 for the design of the logo as speculated,’’ he said.

Mr Sirika said the Nigeria Air project was not lacking investors, stressing that institutions and airlines such as the African Development Bank (AfDB), AFREXIM, US-EXIM, Standard Chartered Bank, Boeing, Airbus and China-Exim Bank, were some of the interested partners.

He said the desirability of the national carrier was occasioned by the fact that no domestic airline had evolved to fill the vacuum left by Nigeria Airways since it ceased to operate more than 15 years ago.

According to him, only 28 out of Nigeria’s Bilateral Air Services Agreements (BASAs) with 83 countries are active and the carrier will give impetus to the emergence of Nigeria as hub for the West and Central Africa.

Mr Sirika said it would promote reliable air transport services and support the growth of the aviation industry and domestic airlines through infrastructure expansion, traffic/routes expansion and manpower development associated with the national carrier.

He added that it would create employment as well as compete with foreign airlines for a share of international routes through competitive pricing thereby reducing capital flight.

The Acting Director-General of ICRC, Chidi Izuwah, said the nation’s aviation sector had the capacity to contribute more than the current 0.6 per cent to the Gross Domestic Product (GDP).

Mr Izuwah noted that in 2017, Emirates Airlines generated 25.8 billion dollars as revenue, while the total revenue generated by Nigeria through its crude oil sales was 20.4 billion dollars.

He said ICRC, as the agency with the responsibility of ensuring transparency in the concession processes, would continue to support the government in its plan to transform aviation infrastructure through Public Private Partnership.